Correlation Between SP 500 and Franklin FTSE
Can any of the company-specific risk be diversified away by investing in both SP 500 and Franklin FTSE at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SP 500 and Franklin FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SP 500 VIX and Franklin FTSE Brazil, you can compare the effects of market volatilities on SP 500 and Franklin FTSE and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SP 500 with a short position of Franklin FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and Franklin FTSE.
Diversification Opportunities for SP 500 and Franklin FTSE
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VILX and Franklin is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 VIX and Franklin FTSE Brazil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE Brazil and SP 500 is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SP 500 VIX are associated (or correlated) with Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE Brazil has no effect on the direction of SP 500 i.e., SP 500 and Franklin FTSE go up and down completely randomly.
Pair Corralation between SP 500 and Franklin FTSE
Assuming the 90 days trading horizon SP 500 VIX is expected to generate 4.15 times more return on investment than Franklin FTSE. However, SP 500 is 4.15 times more volatile than Franklin FTSE Brazil. It trades about 0.0 of its potential returns per unit of risk. Franklin FTSE Brazil is currently generating about -0.15 per unit of risk. If you would invest 169,357 in SP 500 VIX on September 15, 2024 and sell it today you would lose (5,979) from holding SP 500 VIX or give up 3.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SP 500 VIX vs. Franklin FTSE Brazil
Performance |
| Timeline |
| SP 500 VIX |
| Franklin FTSE Brazil |
SP 500 and Franklin FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SP 500 and Franklin FTSE
The main advantage of trading using opposite SP 500 and Franklin FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP 500 position performs unexpectedly, Franklin FTSE can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Franklin FTSE will offset losses from the drop in Franklin FTSE's long position.| SP 500 vs. WisdomTree Natural Gas | SP 500 vs. WisdomTree Natural Gas | SP 500 vs. Leverage Shares 2x | SP 500 vs. WisdomTree Silver 3x |
| Franklin FTSE vs. Leverage Shares 3x | Franklin FTSE vs. Leverage Shares 3x | Franklin FTSE vs. Leverage Shares 3x | Franklin FTSE vs. SP 500 VIX |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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